Question 1: If a stock rose from $10 to $30 over ten years, the annual rate of return:
a. Was 20 percent.
b. Was greater than 20 percent.
c. Was less than 20 percent.
d. Cannot be determined.
Question 2. To determine the realized return on an investment, the investor needs to know:
Income received.
The cost of an investment.
The sale price of the investment.
a. 1 and 2.
b. 1 and 3.
c. 2 and 3.
d. All of the above.
Question 3. The value of a bond index will rise when:
a. Stock prices rise.
b. Stock prices fall.
c. Interest rates rise.
d. Interest rates fall.
Question 4. The Russell 1000 index:
a. Combines 1000 stocks and bonds.
b. Uses the 1000 largest Nasdaq stocks.
c. Is a broad measure of listed and Nasdaq stocks.
d. Is a broad-based measure of bonds.
Question 5. Studies of rates of return on large stocks suggest:
a. The average return is about 7.4 percent annually.
b. Over a period of years, the rate is approximately 10 percent.
c. Equity investors rarely sustain losses.
d. Dividends account for over half the return.
Question 6. Dividend policy depends on:
The firm's earnings.
Investment opportunities available to the firm.
Corporate income taxes.
a. 1 and 2.
b. 1 and 3.
c. 2 and 3.
d. All of the above.
Question 7. Stock dividends increase:
a. The number of shares outstanding.
b. The firm's assets.
c. The firm's equity.
d. The stock's price.
Question 8. Stock dividends cause:
a. The price of a share of stock to rise.
b. The price of a share of stock to fall.
c. The value of the firm to rise.
d. The value of the firm to fall.
Question 9. Which of the following occurs when a stock is split two for one?
a. The price of the stock doubles.
b. The firm's assets increase.
c. The firm's liabilities decrease.
d. The par value of the stock is reduced.
Question 10. Which of the following occurs when a 10 percent stock dividend is paid?
a. The firm's retained earnings decrease.
b. The firm's equity is increased.
c. The stock's par value is decreased.
d. The stock's price is increased.